Correlation Between Anhui Jinhe and Huizhou Desay

Can any of the company-specific risk be diversified away by investing in both Anhui Jinhe and Huizhou Desay at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Anhui Jinhe and Huizhou Desay into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Anhui Jinhe Industrial and Huizhou Desay SV, you can compare the effects of market volatilities on Anhui Jinhe and Huizhou Desay and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Anhui Jinhe with a short position of Huizhou Desay. Check out your portfolio center. Please also check ongoing floating volatility patterns of Anhui Jinhe and Huizhou Desay.

Diversification Opportunities for Anhui Jinhe and Huizhou Desay

0.75

Correlation Coefficient

Anhui Jinhe  Huizhou Desay

Poor diversification

The 3 months correlation between Anhui and Huizhou is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Anhui Jinhe Industrial and Huizhou Desay SV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Huizhou Desay SV and Anhui Jinhe is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Anhui Jinhe Industrial are associated (or correlated) with Huizhou Desay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Huizhou Desay SV has no effect on the direction of Anhui Jinhe i.e., Anhui Jinhe and Huizhou Desay go up and down completely randomly.

Pair Corralation between Anhui Jinhe and Huizhou Desay

Assuming the 90 days trading horizon Anhui Jinhe Industrial is expected to under-perform the Huizhou Desay. But the stock apears to be less risky and, when comparing its historical volatility, Anhui Jinhe Industrial is 1.46 times less risky than Huizhou Desay. The stock trades about -0.02 of its potential returns per unit of risk. The Huizhou Desay SV is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  12,233  in Huizhou Desay SV on October 11, 2024 and sell it today you would lose (1,866) from holding Huizhou Desay SV or give up 15.25% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Anhui Jinhe Industrial  vs.  Huizhou Desay SV

Anhui Jinhe Industrial

Risk-Adjusted Performance

0 of 100

Weak

Over the last 90 days Anhui Jinhe Industrial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Anhui Jinhe is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Huizhou Desay SV

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Huizhou Desay SV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Anhui Jinhe and Huizhou Desay

The main advantage of trading using opposite Anhui Jinhe and Huizhou Desay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Anhui Jinhe position performs unexpectedly, Huizhou Desay can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Huizhou Desay will offset losses from the drop in Huizhou Desay's long position.

The idea behind Anhui Jinhe Industrial and Huizhou Desay SV pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.